Bombay Stock Exchange

Bombay Stock Exchange (BSE) History: In July 1875, BSE was established as ‘The Native Share and StockBrokers Association’ through the presidency of Bombay with the approval of the Central Government. It was set up in order (i) to safeguard the interests of the investing public, (ii) to establish and promote honorable an just practices in securities transactions, (iii) to promote, develop and maintain a well regulate the market for dealing in securities, and (iv) to promote industrial development in the country through efficient resource mobilization by way of investment in corporate securities. It was recognized by the Government of India on August 31, 1957 under the Securities Contracts (Regulations) Act, 1956. Capital Requirements: The capital requirements for companies which are already listed on other stock exchanges and seek listing on the BSE are (i) the minimum issued equity capital of Rs. 3 crores (ii) profitability record of atleast (iii the minimum market capitalization of Rs. 20 crores (based Upon average (size) of last six months, (iv) trading for a minimum of 50 per cent of the total trading days during the same six months on any ex change, and (v) the minimum average volume traded per day during the last three completed months should be 500 shares and at least five trades per day. For new companies seeking listing on the exchange and delisted companies seeking relisting on the exchange, the mini mum post-issued equity capital requirement s Rs. 10 ct-ore Trading System: The BSE computerized us trading system by introducing BOLT (Bombay On Line Trading) on 14-3-1995 initially screen-based trading was confined to 818 major scrips while trading in the remaining s’ was done by the traditional way. Trading in all the 5000 odd scrips has been transferred to BOLT on July 3, 1995. BOLT provides a quote- driven automatic trading facility with an order book functioning as an auxiliary jobber. It serves two purposes. (1) it allows retention and matching of orders against one another where no quotes exist in the system for particular scrip, and (ii) it improves the price competitive character of the market, ii case investors are willing to deal at prices better than the current best quotes. The exchange has signed a memorandum of understanding with eleven stock exchanges, viz.. Calcutta, Pune, Abmedahad, Saurashtra Kutchh, Madhya Pradesh, Vadodara, Bhubhneshwar, Magadh (patna), Jaipur, Coimbatore and Chennai, to provide BOLS connections to the members of the exchanges after obtaining necessary clearance from the SEB Trading system till 2nd of July: The securities traded on the BSE have been divided into five categories, namely, Group A (specified shares in which carry forward/badly trading is a lowed) . Group B (non-specified shares, split into B1 and B2) Group C (odd lots and permitted securities), Group F(debt instruments) and Grou Z (black listed securities).

1. Through badla a trader is allowed to postpone the settlement of an outstanding position in a given trading period to the next trading period by paying badly charging or by depositing a margin to cover any risk which may arise due to price change in the ensuring trading period. 2. B 1 are well traded scrips in he B group while B2 are not well traded. ‘The trading cycle for A 1‘B 1‘B2’ and ‘C group securities represents the capital market segment; it follows the accounting period settlement cycle, which starts on Monday and ends on Friday except holidays. The trading time has been increased from two hours to five and a half hours, i.e., from 10 a.m. to 3.30 p.m. As far as clearing and settlement of transactions are concerned, pay-in of securities (both physical and dematerialized) and funds (to the clearing bank) is conducted on the following Thursday, i.e., the 6 day after the end of trading period, whereas pay-out a [ (both physical and dematerialized) and finds is conducted on the following Monday i.e., the 10 day after the end of the trading period.

Short deliveries, if any, are auctioned on Monday i.e., the 10 day after the end of the trading period, pay-in of securities (both physical and dematerialized) for auction settlement is conducted on Tuesday i.e., the I 1 day after the end of the trading period, where as pay out of securities and funds for auction settlement in conducted on Wednesday i.e., the 1211) day after the end of the trading period. The clearing and settlement of transactions is presented in chart 1. For the F-Group, the trade and settlement cycle goes from Thursday to Wednesday. The settlement takes place immediately following Friday through the clearing house, the pay-out takes place en the same day i.e., Friday, arbitration on Saturday and auction on the 1st Tuesday following the day of payout. The ‘pay-in’ for securities runs from 9.00 a.m. to 11.00 am and the ‘payout’ runs from 3.30 p.m. to 4.30 p.m. The clearing house submits a list of net debits/credits to the Bank of India, stock exchange, branch, and the bank

automatically effects entries in members’ bank accounts directly on the basis of the list. Trading System after 2 of July: A new system of trading in the cash market and forward market will be put in place. In the cash market there would be a compulsory rolling settlement, which will be done on a daily basis. In other words each trading day will be taken as if it is a settlement. When an investor buys shares he will have to pay for them and when he sells them he will have to give delivery. As a consequence of this the circuit filter system which is right now in vogue will be abolished. Further, different exchanges in India have settlement periods closing on different days. With this new system, all settlement days of all exchanges will be the same i.e. on daily basis. While this is the case in the cash market there will be a separate forward market where options will be permitted. There is a proposal to introduce futures also but as of now only options are being introduced. Price Indices: The price indices of securities traded on the BSE are reflected through the BSF Sensitive Index (Sensex) and the BSE National Index (Natex). The BSE Sensex was introduced on 1-1-1986 with the base year of 1978-79. Only 30 scrips are selected from the companies listed on the BSE only and selection is based upon their market activity i.e., those which are highly sensitive to market fluctuations. The BSE started the BSE National Index in 1988-89 with the base year of 1983-84. It covers 100 actively traded scrips of major stock exchanges, i.e., Bombay, Delhi, Calcutta, Ahmedabad and Chennai. Out of the 100 scrips chosen, 22 are quoted exclusively on the BSE, 72 scrips are quoted on the BSE along with other stock exchanges and the remaining 6 scrips, are quoted only on other stock exchanges. Thus 94 per cent of the sample scrips are traded on BSE. The BSE introduced two new indices, i.e., the BSE National Index - 200 and Dollax with the base year of 1989-90 for both the indices. Dollax presents the current as well as the base year values in dollar terms, which are very useful for foreign investment institutions, over seas corporate bodies, foreign investors etc. These indices reflect the market sentiment in a systematic manner to enable investors to know in which direction share prices are moving so that they can revise their portfolio accordingly. On July 8, 1999 the BSE introduced one more index to the list of indices the BSE-500 with the base year of February 1, 1999. It consists of all the scrips in the existing indices such as BSE-30, BSE- 100 and BSE-200 and represents 23 major industries and 102 sub-sectors of the economy. The scrips have been selected taking into account various parameters i.e, market capitalization, industry representation, trading frequency (traded on at least 70 per cent of trading days for the last six months) and number of trades (at least five trades on an average per day during the last six months). However,

the BSE has also set up separate indices for different sectors of the economy, namely, the BSE Durable Index, the BSE Capital Goods Index, the BSE FMCG Index, the BSE Health Care Index, and the BSE Infotech Index. These sectoral indices are helpful to investors to tract industry-wise trends in the market.